UPDATE 1-Trade hopes take Britain's main index back to 6-month high

Britain's FTSE 100 clawed its way to a six-month high on Friday, as lingering hopes of U.S.-China ending their trade dispute cushioned losses in exporter stocks after the pound rose due to a potentially longer Brexit extension. The blue chip FTSE 100 added 0.1 percent, outshining its European peers and on course for its best week since mid-February, while the more domestically focused FTSE 250 of mid cap stocks was down by the same amount by 0846 GMT.

Companies with a greater international presence edged higher in early deals on expectations that a Sino-U.S. trade dispute could be nearing an end, with President Donald Trump saying a deal could be reached in about four weeks. Financial heavyweights with a larger exposure to Asian markets, such as HSBC and Prudential, were the biggest support to the main index.

Miners followed suit, with a 0.8 percent rise as they found their support in gains across most London industrial metals. The pound firmed after news that European Council President Donald Tusk is likely to offer a 12-month flexible extension to the UK's EU exit date, which at present stands at April 12 if no deal is agreed.

After suffering a third defeat in parliament for her Brexit divorce deal, British Prime Minister Theresa May is now in talks with opposition Labour Party leader Jeremy Corbyn to try to find a way out of the deadlock. To that end, Goldman Sachs cut its estimate of the likelihood of a potentially chaotic no-deal Brexit to 10 percent from 15 percent.

Sterling's rise hit exporter stocks Unilever, Diageo and Reckitt Benckiser on the main index. Housebuilders, which are usually quick to rise on news seen as positive by supporters of closer ties with the EU after Brexit, missed out as investors focused on data from mortgage lender Halifax that showed house prices dipped last month.

The price drop "was an unpleasant reminder to the sector over what is at stake, and potentially a tease for a nastier drop if the UK does crash out of the European Union without an agreement in place", Spreadex analyst Connor Campbell said. Leading midcap losers was peer-to-peer lending platform owner Funding Circle, which slumped 8 percent after announcing plans to close its listed fund Funding Circle SME Income Fund after just over three years.

Transport company Stagecoach slipped 6 percent on Jefferies' rating cut, flagging caution on cost inflation headwinds and overcapacity, while real estate investment trust Hammerson also weakened after a Stifel downgrade. By contrast, power generator ContourGlobal advanced 6.4 percent after hiking its dividend for 2018 and guiding for a higher core profit in 2019. (Reporting by Yadarisa Shabong and Muvija M in Bengaluru; Editing by Alison Williams)

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